Video - Bitcoin Scaling - Prague 2016

In this talk, Andreas looks at scaling as an ongoing process. Using the example of the Internet which has "failed to scale, gracefully for 25 years", Andreas discusses the scaling debate and looks at how bitcoin will scale over the next several years.

TRANSCRIPT

ANDREAS ANTONOPOULOS: One, two, one, two there we go. Fantastic. I’m so excited to be here. Thank you so much for having me. This is my first time Prague which I say to my great shame because I grew up in Europe and I traveled throughout Europe but I never managed to visit Prague until today and it’s really an amazing city, quite spectacular and paralleled in policies just such an incredible experiment in community here. I was told that everybody who’s here bought their ticket with Bitcoin which, you know, the average meetup in the United States we’d get three people if we try that. They’d have to teach the other 200 people how to get the Bitcoin.

I titled my talk Thoughts on the Future of Money. In fact I titled my talk for all of the Europeans cities I’m visiting thoughts on the future of money which in summary means I haven’t yet picked the topic and I won’t actually pick a topic until 24 hours before the talk and I picked on this morning. So, actually what I’m going to talk about is scaling.

A lot of you probably have noticed that there is a very interesting debate in Bitcoin today about how do we scale Bitcoin and that’s the topic I want to address. Not from a technical perspective but from a broader perspective to understand what it means to scale. So gather around and we’ll talk about a long, long time ago.

It was 1989 and the internet was dial-up and not just the connection of users to the internet, the backbones of the internet in most cases were dial-up between universities, between research stations. There were few permanent connections, high-speed connections. High-speed 256 kilobits, 512 kilobits, high-speed connections but the internet was mostly dial-up. E-mail had not yet really started to take hold but there was a really special place on the internet called Usenet. Usenet was a discussion system, a system of discussion group where you could post a message in text and other people would see it and then they would respond. But this was not instant messaging, this was slow messaging because in order for Usenet to work all of the messages have to be transmitted via dial-up system and propagated from node to node in a system called store-and-forward, store-and-forward. So you post a message yeah, it would take 24 hours, 48 hours to reach everyone and then they could respond and it would take 24 hours for you to see their response. Today we would compare that to trying to communicate with Matt Damon on Mars as part of the Martian movie. And so at that time there was a really big conversation among the engineers of the internet because Usenet was getting very popular and it was getting very big, kilobytes and then megabytes of text information that needed to be transmitted and at first this dial-up connections would take 30 minutes to an hour but then they started getting longer and longer and to get hold of the Usenet messages would take one hour, two hours and then three hours and so all of the experts predicted if you draw the point we are here, the point we were six months ago and you connect them in a line very soon it will take 26 hours to transmit one day’s messages and then we have a problem because we only have 24 so what happens then? The internet will collapse clearly. It can’t scale. It won’t possibly scale.

At the time there were two parts to Usenet. There was the regular part of Usenet which contained very carefully structured groups for academic discussion. And then there was another little part of Usenet called the Alt, the alternative groups and this was optional. You could carry it if you wanted to, you didn’t have to carry it. So if you are a Usenet provider and you made these groups available the really interesting providers offered the Alt groups and of course all of the interesting stuff was in the Alt groups. Some of the early amazing groups Alt folklore computing, Alt security and of course like everything that’s been driving scale on the internet Alt site. And these alternative groups being optional were the focus of this great debate should we carry them because at this point we’ve started seeing the world’s first spam. I remember receiving the first spam. It was a message posted by Los Angeles lawyer firm that was posted to every Usenet group and you did not do that. That was not cool. A thousand people told them it was not cool, that was the first internet backlash. So the discussion was do we carry Alt groups because if we carry Alt groups the internet will surely melt down and there’s no way it can ever scale. If this becomes popular people will discuss more and if they discuss more we won’t have enough capacity to deal with this data. This conversation lasted for more than two years and there were a few brave service providers that carry the Alt groups and they use massive hard drives, five megabyte hard drives with the size of – you know a very big thing. And again the main idea was if you take the where we are here and where we’re going up there we hit a wall. So the internet couldn’t scale. That was the basic beginning of the scaling issue on the internet and it couldn’t scale and wouldn’t scale clearly and many people wrote their Ph.Ds. on why it couldn’t scale. But of course the thing is networks don’t scale. Networks failed to scale and some networks failed to scale gracefully for decades and those are the ones that succeed. So we solve the Usenet problem. The digital connections were upgrade, more systems connected with leashed lines and direct connections, dial-up gradually got replaced by leashed lines, people started investing in the infrastructure and we could comfortably carry Usenet so people started using e-mail and we started the problem all over again because now e-mail started getting popular and as e-mail got popular it started replacing and eclipsing the size of Usenet. Now we had an even bigger problem because people wanted to communicate directly. Now a message didn’t take 24 hours, it took two hours to cross the internet which meant that people started having real time conversations (0:08:07) real time so e-mail started exploding and so the internet couldn’t scale because if you look the way e-mail is today and where it was six months ago and you draw a line it will melt down and people wrote more Ph.D. thesis about how the internet would die under the load of e-mail and never scale. But then gradually we started optimizing that and solved it and we solved the e-mail problem and when I say we I was watching because I was just a 16-year-old who didn’t know what the hell was going on but we as people, as humanity we solved the problem so we scale it. So the internet failed to scale for Usenet and then it succeeded to scale for Usenet so that it could failed to scale for e-mail and then it succeeded in scaling for e-mail so some smart ass idiot went and invented MIM (multimedia internet messages) which meant that you could attach things to e-mail and these attachments were 10 times the size of the text because people started sending bigger things like drawings and pictures and of course once again (0:09:17). So we could scale for e-mail but not for e-mail attachments so everybody was up in an uproar we’re never going to be able to scale for e-mail attachments. The internet will surely melt down. And then we solved it until some British guy Sir Tim Berners-Lee who then was just Tim invented the web and now you could put the pictures into frames, this was about 1992. I downloaded and ran the first web browser NCSA Mosaic at my university lab. We gather together three, four friends we worked for hours to get NCSA Mosaic downloaded and compile and install and then we launched it and we visited the web all of it. I can say a sentence not many people can say because in 1992 I visited the entire web in an afternoon both sites because there were two and I visited both sites and I looked at that and I felt Oh, my God this is going to be huge, huge. The internet will never scale but just imagine what you can do with sites and the web. Of course this became the scaling application as we all know it’s been driving internet developments since but we don’t talk about that in blithe company. So then the internet was failing to scale for the web and people say we can never do all of these images and hypertext documents and it will totally fail to scale and more Ph.Ds. were written and more discussion and the internet was still failing to scale but by now it had been failing to scale for more than a decade, very graceful, very successful. So then some idiot invented Voice Over IP and now some other people decided why don’t we just replace the entire phone system with the internet but that was a crazy idea. So the phone companies then started this massive campaign to inform us of why packet switch networks could never carry voice and really the true quality approach to voice was always going to be hierarchical switch networks owned by national monopoly telecom companies because the internet couldn’t possibly scale to carry the world’s phone calls. Those same companies now route all of the phone calls over the internet. So first, they didn’t want the internet on their phone networks then they allow the internet on the phone networks then they build their phone networks on top of the internet and then we started sending videos and then the internet couldn’t scale again because YouTube was going to melt down the internet clearly and we needed some content quality and filtering because we can’t allow every idiot to go and publish a video about their cat because there are already a thousand cat videos and if you draw a line from how many cat videos there were yesterday to how many cat videos there are today you are extrapolating. By the end of this decade there will be a billion cat videos on the internet which is (0:13:06) exactly what happened. Pardon me. But we scaled and now we do 3D video and 4K video and then Netflix came along and so we see the same mistake which was that in 1992 when I visited the first website my thought was “Wow, TV is do dead” because one day we will be able to transmit movies instantaneously. Now if you go and say that to respectable network researcher in 1992 they’ll call you an idiot because clearly if we had Netflix in 1992 a single video stream to a single user would melt down the entire internet and yet here we are today. And by the way the internet is failing to scale for Netflix and all of the other companies that are doing live video and it will continue to fail to scale incrementally and gracefully and soon we’ll be doing Oculus Rift holographic 3D 4K VR and then it will really fail to scale and people will still write Ph.D. thesis on why the internet is about to melt down. And the reason for this is really simple. It is because scale is not a goal to achieve. It is the definition of what can you do with the network today. And the moment you increase the capacity the very definition of what can you do with a network today changes because somebody says “Hang on a second, you mean I can now do X which has 10 times more demand than what I did before? Let’s do some of that” and then you failed to scale again. So scaling is a moving target. Scale defines the edge of today’s capability and as it move forward capability increase. Bitcoin is failing to scale and if we’re really, really lucky Bitcoin will continue to fail to scale gracefully for 25 years just like the internet because the very same types of companies that then were saying the internet can never work for all of the e-mail, it can never work to do quality voice calls, it could never work to do quality video the same kind of corporate arguments are now being said so why Bitcoin can never do retail payments, it can never do Visa scale, it can never do global scale and if it’s actually adopted it will collapse and right now there are dozen people writing their Ph.D. thesis on why Bitcoin will fail, has failed this time, was dead and has died again.

There’s a beautiful site called bitcoinobituaries.com where you can read the pronouncements of the death of Bitcoin since 2009 regularly like clockwork every three to six months. Major newspapers, scientists, etc. are saying “Okay, that’s it. Bitcoin is dead.” In fact this has now become an amazing recruitment opportunity because all you have to do is wait for people to hear first that Bitcoin died. The CEO of Bitcoin was arrested. Bitcoin was shot down by Putin. And then four months later someone says “You know there is some interesting new applications on Bitcoin” and you go Bitcoin’s still there? Bitcoin is still there is the marketing slogan in this community. If we can just keep doing Bitcoin is still there people are surprised, they are confounded. It doesn’t match their expectations. It’s not possible that Bitcoin is still there because very serious people with very serious titles working for very rich companies told them that Bitcoin would not still be there but Bitcoin is still there because we are failing to scale gracefully.

When we failed to scale during a stress test or capacity test, when the network is flooded with transactions what happens? Some users experienced a terrible situation. They do a transaction with 0.1 millibits like they’ve always done and it take three days to confirm. And during that time they’re freaking out especially if they’re new users because new users assume that the money has left their account – there are no accounts in Bitcoin – and is en route to the destination account – again, there are no accounts in Bitcoin and therefore is somewhat in limbo in between but the money is really still in their account. It’s just that the wallet says it hasn’t been confirmed yet, right? It’s either back to source or at the destination atomically with one transaction. There is no intermediate state. It can’t be in limbo because Bitcoin doesn’t transmit, it settles. So we experience these sudden problems and some wallets behave intelligently and they increase their fees sometimes by 100% so “Oh, (0:19:00) instead of it costing four cents to send the global transaction in seconds anywhere around the world with censorship resistance and open innovation and open access to everyone it take seven cents to send that transaction and clearly this is an indication together with the people who had three days to confirm that transaction that Bitcoin surely is dead now” and some of the developers go “Oh, I give up, Bitcoin’s dead.” The newspapers write Bitcoin is dead, transactions are not going through. Transactions are going through it went through for me. I was running a wallet that was intelligent between its transaction calculations but what happens in the aftermath of this capacity grudge? We get better wallets and that’s really the essence of a dynamic system responding to pressure because as we get better wallets these better wallets calculate fees more correctly and it’s a lot easier to jam the network if there’s a lot of dumb wallets doing 0.1 millibit fees because then all you have to do is do 0.11 millibit fees and you are king of the hill because the other idiot didn’t update and you jam the network with your transactions. But if they’re able to do 0.12 millibits now you have to do 0.13 and now we’re in a race and before you know it you’re spending 0.5 millibits “Oh, dear” on a transaction which of course if you’re a legitimate user it’s nothing. If you’re trying to jam the network it starts getting really expensive really fast which brings up an interesting question – what is a spam transaction? What is a legitimate transaction? What is an illegitimate transaction? There are two ways to answer this. One, is a paternalistic top down approach that says this is what is allowed, this is what is not allowed and by making a list we will prevent the network from filling to capacity. But that breaks the fundamental capability of Bitcoin which is net neutrality. Bitcoin doesn’t care who the sender or the receiver is, what the application is, what the value of the transaction is. All it cares about is that you pay the fee and if you pay the fee your transaction is legitimate by definition because you thought it was legitimate enough to attach that fee. The very act of paying the fee legitimizes the transaction because if we start making decisions about what is spam and what is not we are now choosing the future of Bitcoin and constraining it into a set of applications that we can imagine and the brilliant person who creates the application we can’t imagine that may look like spam to us, doesn’t get carried across the network we made it top down decision to say that transaction is illegitimate and the other way of doing this is to say how about we use a market to solve this problem. We have a market, we have a currency, use the market to solve this problem and allow the market to establish the minimum fee that meets the requirements of supply through the miners and their need for propagating blocks fast and the demand of the users for the applications they care about and if you pay the fee your transaction is legitimate. There is no spam transaction. There is no such thing as an illegitimate transaction. There are only transactions that did get mined and transactions that didn’t have enough fee to get mined. And so this is how Bitcoin is going to play out and this not going to be solved. It’s not going to be solved because we will have the scaling discussion every year for decades into the future hopefully and every year we will fail to scale for the next application and succeed to scale for the previous ones. And as soon as we do better people will invent new applications and we will fail to scale again. The internet failing to scale gracefully for 25 years, Bitcoin let’s keep failing to scale gracefully and Bitcoin is not yet dead. Thank you.

We’ll do some questions?

MAN #1: Yes.

ANDREAS ANTONOPOULOS: Very good.

MAN #1: Thank you very much, Andreas. Now is the time for more questions. If you have questions please just raise your hand and I will rush to you with a microphone so, yes, please and I will give you the first question. It is already, I think, two or three months that Mike Hearn right now left the Bitcoin community

ANDREAS ANTONOPOULOS: Yes.

MAN #1: And me personally I admire him for his work so I was very surprised by his strict position on that the Bitcoin community failed and that this is why the Bitcoin failed. Can you tell us your position on his move?

ANDREAS ANTONOPOULOS: Well, coincidentally I saw Mike two days ago while I was at a conference in Zurich and Mike was speaking right after me on the other stage and so we met again, we’ve met a few times. We actually spoke at the same time at the very first conference in San Jose in 2013 and his room was full and my room was empty. I had begged them to give me a speaking slot and they gave me one very reluctantly and nobody came. You can see that video it’s online, it’s pretty good. I talked about Bitcoin neutrality. Anyway, Mike was in the other room he was doing his talk. He’s been around for very long time in Bitcoin and so when I saw Mike I said again, “Hey, thanks for everything you did” because the thing you have to realize is that even when we disagree we’re on the same side. Even when we disagree violently we’re on the same side. There are plenty of people out there who don’t want to see Bitcoin succeed. But the one thing we all have in common is that we love this idea. And here’s the interesting thing you might not realize but Mike love this idea too. He just didn’t think it was working right but he still loved it. He wants it to succeed, he just doesn’t believe it will. And more importantly he’s made incredible and enormous contributions to Bitcoin. His last contribution was to drop the price by $40.00 and allow more people to buy Bitcoin at a reduced price because of an article in The New York Times. And so people had the opportunity again to buy Bitcoin at 380. There might be a good opportunity for some mostly and Bitcoin failed to die. So, thank you Mike for everything you do. That’s all I have to say. I don’t believe in the angry debate, the paranoid conspiracies, I think Mike is wrong. I think as my entire presentation was why Bitcoin will continue to scale and in fact I think the government’s problems that seems so acute are not really acute. What they are is the fact that Bitcoin is hard to change. And in many systems when there is a very strong debate the debate is resolved because somebody says “You know what, that’s all, great but I’m the boss so this is what we’re going to do.’ Okay, discussion over. And in Bitcoin there is no discussion over because there is no boss because no one can impose their position on anybody else so we can go back and forth and back and forth and back and forth forever arguing about this. But some of the people who are arguing about this are screaming at each other and saying “Oh, you’re a CIA agent you’re trying to destroy Bitcoin” and “You got paid to say that” and “No, you got paid to say that” and some of the people are sitting down and writing some bloody code which is how you succeed because Gavin and Jeff and (0:28:12) Classic and Greg and Peter and all of the other has went and wrote Segwit and guess what’s going to happen by the end of this year. We’re going to implement Segwit and we’re going to do a hardfork to do (0:28:28) MEG and we’re going to do thin blocks and RBF and (0:28:34) and prioritization and extra thin blocks and extreme thin blocks and other optimizations and invertible bloom look-up tables that Gavin started working on almost two years ago, we’re going to do all of those things just to get to the next level of scale and then we will invent new applications that filled that bloody network and failed to scale again. So, let’s take the next question. Who wants to ask me a question?

MAN #2: Okay, great. May name is Karel (0:29:06) I am writing for (0:29:08) Czech Republic.

ANDREAS ANTONOPOULOS: Hello, Karel.

MAN #2: Nice to meet you. And I think I’m a bit (0:29:14) about sometimes I (0:29:17)

ANDREAS ANTONOPOULOS: Yes.

MAN #2: And my question – my question is if you have ever been in doubt about Bitcoin or future of Bitcoin? That’s where people (0:29:31) for me. Thank you.

ANDREAS ANTONOPOULOS: Yes, I have been in doubt. There was a moment where I really, really got worried and that was the day I got a call from one of the people I know in Bitcoin and they’re saying “You know what, we have good information that empty GOG insolvent and going to blow up today and get ready for it because it’s going to be ugly” and in those days there were really just one exchange and it did all of the volume and empty GOGs blows up we have a big problem. And it didn’t blow up (0:30:13) but an hour after I heard it was going to blow up it blew up and I did for a moment get scared there. I was like “Oh, this is just going to be so bad” and then part of me, this little voice in my head is going “And we will go to 10.” This other little voice in my head was like “If it goes to 10 you could buy a 10 again” and these were fighting because I went in like panic but at the same time I was like “Yeah, this is going to work (0:30:49).” Here’s the thing there are so many people who will not give up no matter what the price of Bitcoin. They will not give up. I will not sell my Bitcoin I will rather watch it go to zero than (0:31:03) ever but I don’t really have Bitcoin but that’s not the point but I will be one of the many thousands of people who absolutely refused to give up and all it takes for Bitcoin to continue to exist is two nodes. Hopefully one of them at least or both are mining nodes. And that’s it. Maybe the difficulty will go back to where I’m mining on my laptop. I never got to do that. That would be fun.

And so, sometimes people tell me Bitcoin will go to zero. Really? If you go to Rome you can buy Roman sesterces at a store that hasn’t been in circulation for 1700 years and it’s not zero. You can buy drachmas in Athens that haven’t been in circulation for a decade and it’s still not zero. Currencies actually don’t go to zero because sometimes they just have sentimental value and touristic value and historical value and I can tell you something there’s nothing that has more sentimental in historical value than Bitcoin and I’m not going to bloody sell it. So, nowadays I don’t really worry anymore, I really don’t. Yes?

MAN #3: I want to ask again.

ANDREAS ANTONOPOULOS: Please.

MAN #3: (0:32:29) there’s around 600 of altcoins already –

ANDREAS ANTONOPOULOS: Yes.

MAN #3: – and around 100 of altcoins went to zero already so so how do you –

ANDREAS ANTONOPOULOS: Well, they didn’t go to zero, they went to 0.0000015 but someone still has them.

MAN #3: Yeah, but how do you know or how do you believe that the Bitcoin is not a case of the altcoin. How do you – what is the difference between for example, Bitcoin and, I don’t know, Litecoin or another cryptocurrency? Why do you prefer Bitcoin?

ANDREAS ANTONOPOULOS: We did it first, we did it best, we’ve got the absolute best development team in the industry. The most intelligent, amazing scientists, engineers, software engineers and development teams that are building amazing stuff everyday and I can barely keep up, you know, just when I think it’s like okay, I’m done reading for the day and somebody drops segregated witness on me or some new innovation and I’m amazed again. So, I mean here’s the other important thing which people don’t realize is that Bitcoin today is not what Bitcoin was in 2009. It’s the same name, it’s the same 21 million coin count, it’s more or less the same transaction structure but a lot of other things have changed quite dramatically. One of the stories of scaling is that sometimes the only thing that scales is the brand. I’m 44 years old not a single cell in my body is one that I was born with have all been replaced by now. They’re all gone. All that remains is the pattern, right? And so when I was in college they say Ethernet can’t scale to one megabit and Ethernet can’t scale beyond five megabit and Ethernet can’t scale beyond 10 megabit. Ethernet is a networking system if you’re not aware and I install Ethernet, it was a coaxial cable as thick as my thumb and it could only go 100 meters and it could only do five meg and today all of the local area networks run on Ethernet that can now do 10 gig over fiber but how much of that is really Ethernet and how much of that is just the word Ethernet attached to what we made it into because it’s a different distribution medium, different architecture. The only things that are really the same are maybe the frame size and the brand. So one of the issues that you have to reconcile yourself with is that Bitcoin 15 years ago may only – 15 years from now may only share with today’s Bitcoin three or four fundamental properties. The 21 million coin cap that’s not going away, if that goes away it’s not Bitcoin but that the brand name, that’s the basic architectural characteristics. Everything else may change, everything else maybe completely revised and we’ll just still call it Bitcoin. So, I don’t believe that we need to worry too much but altcoins to me are very important part of the ecosystem and in fact the more we have them the more they experiment the better it is. Something really important happened this year, people fled Bitcoin into Ethereum and that was awesome, that was awesome because all of the previous times when they fled Bitcoin they left the cryptocurrency economy and this time they simply switch lanes. They didn’t abandon cryptocurrencies. They left Bitcoin and went to Ethereum to see what the other side doing and look at what’s going on over there. They are not fighting yet. They are still scaling for now and uh, it’s so cozy and nice and it got contracts and smart stock. We also have humans and human nature always prevails so pretty soon you’re going to see some interesting things like the ones we have in Bitcoin happen. Bitcoin was fine, it was scaling fine in 2012 nobody was arguing that. So the bottom line is that we’re now keeping people in the cryptocurrency space and as people went to Ethereum and the price went up new people came in from the outside who in order to buy Ethereum because they did not believe that Bitcoin was a good medium of exchange first bond with Bitcoin to use it as a medium exchange to buy Ethereum. So, we’ll see how it goes but I’m very optimistic.

MAN #4: Hi, Andreas. I mean I’m from (0:37:25)

ANDREAS ANTONOPOULOS: Hello, yeah.

MAN #4: My question is what is (0:37:27) selection for the Bitcoin if you go for the (0:37:33) because we have started a new feature (0:37:37) in the last two weeks that allows (0:37:41) –

ANDREAS ANTONOPOULOS: Yes.

MAN #4: – for the site (0:37:44) in the future and I think today Mike posted his own personal opinion and we started a big reddit discussion and big shit storm going on us right now, I think so I’m wondering what is your personal opinion on (0:38:00)

ANDREAS ANTONOPOULOS: I’m surprised you’re having a big shit storm on reddit because reddit has always been such a civilized (0:38:08) and they never attack people. What happen? I run core, three nodes; I run classic, two nodes; I run Ethereum, one node so far; I ran XT, one node and I will run everything that comes out that I have an interest in evaluating and understanding and propagating and to me this will be resolved one way or another. The simple answer is that as long as the plan is working then core can execute that plan. If core stops executing effectively they will lose the confidence vote and the immense centralized monopoly power of core will melt away in less than 24 hours and people will run an alternative client and guess what will happen the day after core will merge the hardfork and keep working because they will receive that vote and go with consensus. There are people who believe in big blocks, there are people who believe in small blocks and you can have the most well-developed beliefs in Bitcoin up until one week before the fork and then everybody goes “Well, ideologically I am X but the winds are blowing classic today so I’m going with consensus” because no matter what opinion you have in the end you may think that this may not be good for or may be good for you but if you go against consensus you suffer a 100% loss of your income and so the safe bet is always consensus. And all of the ideology melts away because at the very end what matters only is the personal motivation, the invisible hand that guides each person to make a choice on their own about their own best interest and that is the genius of Satoshi and consensus wins every time. So I am not worried because I am not a classic supporter or core supporter or any other kind of support. I’m a supporter of good code that works and is currently in consensus and if that changes I will take the new data and change my opinion accordingly.

MAN #4: Okay, thank you.

ANDREAS ANTONOPOULOS: Yes?

MAN #5: Wait a minute.

ANDREAS ANTONOPOULOS: I’ll try to keep my answers shorter so that we can do more questions. Sorry, if I’ve been rambling.

MAN #5: Yeah, hi. So basically you’re saying that you’re depending on the decision of the miners from the Chinese (0:41:20) saying it’s not our decision, it’s decision of the miners.

ANDREAS ANTONOPOULOS: No. There are five consensus communities in Bitcoin. There’s developers, there’s miners, there’s exchanges, there’s merchant processing and there’s wallet and they go together because if you’re a miner and you’re mining on a chain that doesn’t have the support of the wallet the exchanges in the merchant then you’re mining a coin that you cannot sell, use or exchange for anything and then you’re on the wrong side. You can get the longest chain and if the economic consensus is on the other side you’re wasting your time and of course the miners know this so they’re not going to make any move until they believe that the economic side is with them and they know for sure that this is the way that’s going to be the most successful way forward and they’re very conservative in that decision because they have millions of dollars invested. They realize something else a lot of the miners today buy electricity on long-term contracts, six months to a year which means they’ve already paid for this. They’ve already got all of the hardware and the only option they have now is to run and pay it off. They cannot turn off this hardware so they will continue no matter what the difficulty, what the price or which side of the fork they’re on they are not stopping to mine. It’s not just the miners making decisions.

MAN #5: Just one – just one small question. Right now no wallet is supporting Segwit and I don’t know if this is going to be the legitimate Bitcoin (0:42:59) because Mike I don’t know if he’s still working on that so I’m not sure if –

ANDREAS ANTONOPOULOS: Well, that’s not –

MAN #5: (0:43:06)

ANDREAS ANTONOPOULOS: That’s not entirely true. One wallet supports Segwit and that’s the core fork by Peter Woolley (0:43:16) that one Segnet and that supported segment and works and is being tested now for more than four months I believe. Segnet the production level segregated witness test network has been working and doing transactions for four months with a wallet that obviously is producing Segnet transactions but the standard is not finalized yet and therefore without a finalized standard you can’t go ahead as a wallet at all. I can guarantee you all of the developers are writing test code right now all the serious ones, the ones that are still going to be around are trying to implement prototype of Segnet and Segwit. I am writing a prototype Segwit implementation for my own uses and company and everybody is behind the scene waiting to see what happens but the current roadmap is for somewhere between April and June for the deployment of Segwit into production. So, have some patience it’s going to happen. Yes?

MAN #6: Okay. I –

ANDREAS ANTONOPOULOS: Nope. There, yes?

MAN #6: (0:44:28) for ProtonMail I just want to ask generic question (0:44:31)

ANDREAS ANTONOPOULOS: ProtonMail is awesome.

MAN #6: Thank you.

ANDREAS ANTONOPOULOS: Thank you.

MAN #6: Do you believe Bitcoin can survive government intervention and or regulation (0:44:38) like let’s say the big countries (0:44:45)

ANDREAS ANTONOPOULOS: I have never seen global collaboration between countries on regulating anything. So if the governments of the world can get their assent to care to deal with global warming that is literally a threat to the tiny little blue lifeboat we are hurtling through the cosmos zone you think they’re going to get together and agree on Bitcoin especially when strategically they’re all thinking “Well, if Bitcoin happens I’m fucked but those guys are more fucked than me.” So maybe if we let it happen it can cause them to have a currency problem before it causes us to have a currency problem and then we win. And I’m not joking about that because I am pretty sure that would be the kind of calculation that would see in a lot of countries that are thinking about whether Bitcoin should be regulated and so they regulate it so what? So what? What are they going to do? Threaten people with death if they use Bitcoin? They already do that in some countries and guess what people will do, they’ll use Bitcoin and then when the policemen comes they’ll bribe the policemen in Bitcoin and up the chain it goes until the head of the state is stuffing wallet full of Bitcoin. The bottom line is that in countries where the rule of law matters money is a form of speech, freedom of association, freedom of expression, freedom of speech protects political expression through currency. In the United States we put that into a United States Supreme Court decision under Citizens United it said you can’t regulate campaign contributions because money is speech. So in countries where the rule of law matters you pick that fight head on with Bitcoin and we’re going to take it all the way to supreme court. Do you know how many lawyers per day Marc Andreessen can hire? And the problem is that they may lose and losing on a decision that says Bitcoin is protected speech is much worse than the status quo which is kind of gray. So that’s not going to happen. And in countries where the rule of Putin is the rule of law ban Bitcoin they say and nobody gives a damn. Bitcoin is evil. Really? You say it’s evil I got to look into this because every time you say something is evil it’s because it’s good for me and bad for you and I don’t (0:47:30) you. This is happening in Venezuela right now. They are like Bitcoin is the currency of terrorists, pedophiles, extremists and criminal. Don’t pay attention to our 550% inflation rate and please leave your money in the currency of choice and go with us to the bottom as hostages of our insane policies. And what some obviously technically literate are very tiny percentage of the population in Venezuela probably now thinking “Really? Hmm, I should look into this.” Yes, who’s got the microphone? I think over here was the next one. Yes, go ahead.

MAN #7: (0:48:14)

ANDREAS ANTONOPOULOS: Yes.

MAN #7: 30, 40, 50 years ago (0:48:19) some exchange look like (0:48:25) no nation states with a (0:48:28).

ANDREAS ANTONOPOULOS: I try not to make predictions in Bitcoin exceeding 30, 40 days into the future because the best way to be correct is to make a prediction because the future is very harsh when it comes to predictions. The worst part is that if you make a really stupid prediction you will go down in the history books like that guy who said the world will only ever need one computer and like the guy who said electricity is a fad for the Paris Fair and will disappear as soon as we dismantle the Eiffel Tower. Wrong on two counts in the history books. I can’t do a prediction out to 30, 40 years I do know that the nation state as a system of organization is being severely threatened by network-centric organization on a global scale. Today the 10 largest populations in the world four of them are nation states, six of them are internet applications. Facebook is the most populous concentration of human beings on the planet, Instagram, Snapchat, WeChat etc. etc. follow that. Somewhere down there is China, India and then in certain place the United States. So, the world has already changed. Whether that will affect nation states, we’ll see. One of the people in Bitcoin who’s really interesting has interesting ideas Balaji Srinivasan who is the CEO of 21 Inc. once told me the future of politics is not left versus right, it’s land versus cloud and most of the world still lives on land but some of us now live in cloud. And land wants to keep us tied up and tax us based on where we live but we don’t live in any specific place. We travel by air or over the road and this is going to be the dominant battle of the future, the global community of the network versus the landlocked feudalist past. We’ll see.

MAN #8: Hello.

ANDREAS ANTONOPOULOS: Yes.

MAN #8: My name is Martin and I have a question you. Andreas, what’s your personal view on how (0:50:45)

ANDREAS ANTONOPOULOS: Sorry? What was the –

MAN #8: (0:50:51)

ANDREAS ANTONOPOULOS: The halving. Yes, the great halving of 2016. So, to explain for those of you who are not quite familiar with this every four years the amount of subsidy in each block decreases by 50% so we started with 50 Bitcoin per block we’re now in the era of 25. We are going to enter the twelve and half era approximately on July 22, 2016. One of the interesting things about Bitcoin is that we know what the monetary policy will be in 2140 and with the federal reserve we don’t know that the monetary policy will be this Friday or with any of the other central banks. Although I have a premonition that it’ll probably involve more stimulus and more printing money because that hasn’t work a hundred times but a hundred first it probably will. So what happens in the halvening? As I said miners prepay electricity in many parts of the mining eco – that’s not universal but it is one of the characteristics of the mining community which actually has some really serious implications on their decision-making process because it sunk capital. Secondly, we’ve now achieve a situation in mining where we’ve seen from the CPU to the GPU to the FPGA to the ASIC increases of 100 or a thousand fold performance increases until we accelerated straight into Moore’s law and that’s a wall because 16 nanometers done. Okay, now where do we go? Now we slow down to 2X increases every 18 months and everyone can get the same chip and there’s no advantage in pre-ordering and you no longer have to switch chips every three to six months so therefore capital connects us to silicon fabrication centralization of purchasing no longer matter and this has started happening at the beginning of this year and we will go into that halvening with a situation where there will be the haves and the have-nots – those who have 16 nanometer and those who don’t. And those who do not have 16 nanometer will find themselves unprofitable very quickly and the rest will not. So, we’ll see. I predict the price will go up and down. And then it will probably go up and down again because the primary driver of price is still by a great extent sentiment. So halvening is coming I think Bitcoin will go up. Bye-bye, bye-bye everybody else sees that the (0:53:40) bye-bye, bye-bye, everybody bye. It’s great. Oh no, I’m not too sure, I’m a bit worried so, so, so, so, so, so… and up and down we go. It’s going to be a roller-coaster. Volatility will probably increase. We’re in a period of pretty no volatility, we have been for at least a year now where the volatility of 2011 and 2013 is in our past we’ve been relatively stable for a tiny six-billion-dollar global currency but we’re going to see increased volatility. And so, my suggestion is take a deep breath, relax, don’t try to play the casino unless you are an experienced stock gambler in which case good luck to you. Sit back, relax, watch the fireworks and read the news about how Bitcoin is dead or about to die because of the halving and then wait until right after when Bitcoin is not yet dead. Who has another question? Yes, go.

MAN #9: Hello (0:54:42)

ANDREAS ANTONOPOULOS: Yes, hello.

MAN #9: (0:54:43) continue in the Karel’s question where he first (0:54:47) touch a little bit is when he asked you if you are like doubt sometimes. I’m becoming like really (0:54:56) and I’m just, you know, reading the articles like big corporate, companies and banks investing like millions of dollar to research for like Blockchain technology and stuff. What do you think about like why should they adopt a currency which like 60%, 65% is already out there (0:55:23) the people where like early adopters have when they thought that and what makes them to stick with Bitcoin and not to make their own currencies and like, you know –

ANDREAS ANTONOPOULOS: Nothing. Banks cannot adopt Bitcoin. They cannot adopt Bitcoin. Bitcoin is the poison pill of global finance. Bitcoin is the pill you cannot swallow because Bitcoin is global, is borderless, is not controlled, is peer-to-peer, is censorship-proof and none of the financial world can allow any of that and therefore they can’t do it because if they are banks they are institutionally trapped in a regulatory system that they build as a castle around them to prevent competition and in which they are now prisoners in their own castle and can’t leave because they cannot go outside of regulation. The same thing that prevented competition for 50 years is now their prison and so they cannot do Bitcoin until they have to because everyone’s doing it maybe, or maybe not and they will build. They say “Great. So, we heard about this very interesting open, decentralized, peer-to-peer, borderless, uncontrolled, censorship-resistant currency. We would like to create one just like it only not open, not borderless, not peer-to-peer, not decentralized, not censorship-proof and controlled by us.” The problem is that we use a Blockchain which is an incredibly inefficient way of settling global transactions because we want to get the benefit of freedom, financial freedom, censorship-proof, global access, open access, empowerment for all and if you don’t want these things and I can guarantee you the banks don’t then why pay the inefficient price for a Blockchain that doesn’t give you anything because it’s no longer immutable if you’re doing signing. It’s no longer unforgeable if you’re doing signing, it’s a giant honeypot for anonymous. It’s going to be so much fun when they start breaking into the bank Blockchains or when they take over the signing keys of a central bank’s fancy new Blockchain based digital currency that they launched and hold them to the most amazing ransomware ever – we have your country. We will begin issuing or not issuing currency with your keys or you have to change them in a very disruptive operation unless your queen dresses in a hotdog suit and dances in the garden of the palace on YouTube. You have two hours. Blockchains without proof-of-work are not secure and so I have this free advice for the banks. Purchase and install Microsoft SQL Datacenter edition so it’s scalable. Make one of the fields a hash pointer to the previous field and one of the fields the digital signature of the proof-of-authority. That’s not a Blockchain but it’s hell of a lot more efficient and does everything you want to do which signing instead of mining and change of transactions with hashes, right there. It’s going to be a thousand times, ten thousand times, twenty thousand times, a hundred thousand times faster. So, let them do Blockchain. We are building the internet of money. They are building the Microsoft front page of money. The Outlook of money, the intranet of money and what is the intranet? It’s the place that is not secure where you can’t run any of the cool applications, where all you can do is read still contents that your IT department approved six months ago about what are the latest HR policies. That’s what they’re building in a currency. Okay, let’s take maybe one more question and then wrap it.

ANDREAS ANTONOPOULOS: Patent law can slow down Bitcoin companies but it cannot slow down Bitcoin because Bitcoin not a company. And so who are you going to sue if Bitcoin core software implement something that someone claims is a patent. The people running it, the people who coded it, the people who code it the first commit of that specific feature or maybe subsequently patched it or then rewrote it completely? Who are you going to sue with patent law? You can’t sue – you can sue companies. Patents are going to be a very big problem for Bitcoin startups. Trademarks are already a problem for – as you may have noticed it in my little fight online with a company that trademarked The Internet of Money which they did not invent but these are going to be problems for Bitcoin companies and so we must reinvent what it means to be a company. What it means to be an ad hoc association of human beings operating virtually across the world in a decentralized manner on a Blockchain with voting rights and dividend rights in an association. That is theoretically still a company but it’s also something that doesn’t look anything like a company and as all of the members are anonymous you’ve got a bit of a problem enforcing your patent law. So, things are going to get interesting. We’ll see. As always the law lags by a decade from the application of technology and they are writing laws now to regulate Bitcoin of 2009. Do you think they have any idea what Locktime payment channels, segregated witness and confidential transaction are going to do to their silly little laws because Bitcoin moved on, right? By the time they catch up with this we’re going to be 10 years ahead and we’ve been playing this game on the internet for 25 years, I think we’re winning. So, good. Thank you all for coming here today. Thank you.